Jernigan Capital (JCAP) 27 Feb 202019 Q4 Earnings call transcript

Greetings. Welcome to the Jernigan Capital Incorporated Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

the President to of turn Corak, host now Vice Senior Corporate will conference your over David I Finance.

You may begin.

questions Good open Jernigan all in The Capital Thursday, February call. welcome participants Today's conference to are XXXX Corporate XXXX. to remarks. being President and will following David floor conference recorded, is Vice is My management's morning earnings mode. name At Finance. a Senior of XXth, your listen-only call fourth prepared be everyone quarter Corak, the this time,

begin, please to laws. Private securities XXXX we defined forward-looking remember Before of remarks that federal the and your statements management's answers Securities in contain Act other prepared Litigation Reform questions may and as

statements business. SEC due the encourage in risks associated review. could with forward-looking statements the filings uncertainties These with to materially the which Actual stated results or forward-looking differ and company's are those company's latest contained cautionary we from qualified statements the by to implied our you by

the A measures earnings GAAP included provided press release. reconciliation our is call to in of this on financial non-GAAP

You press SEC audio release, reports, on of at conference replay call webcast our this our can website and find www.jernigancapital.com.

to myself, Good, and Chief call Jonathan today, on we Chairman Vice and Kelly have Investment CFO. Perry, John President Luttrell, and the CEO; Officer; Senior addition and In President

I'll I'll turn now Good. it the floor now John? turn -- over to Mr.

a for our year XXXX company. tremendous Thanks was David everyone. good and morning

time advised our consistently the next equity followed over internally articulated past summarize backdrop, Our team table steadfastly have the life set continued years to use now like for XX to that our Under achievements stage as and we business execute the my I'd that is past to the REIT. over the major of months. plan an five and

of XXXX, XX% XXth approved our the XX% represented Firstly, we of internalization We shares shares was voted Special Stockholders on agreement and which a of February represented and in overwhelmingly held our Meeting had the shareholders closed by over Thursday. our favor at executed in definitive last for of December those internalization.

price, strong the incentive of to the we in price, increase in for substantial future year, stockholders, of strongly earnout have that and stock, We our increased cost fair consideration provision between management value and boosted internalization Also by interest stock alignment the savings, success. as the during level achieved stockholder growth. positioned evidenced value a solid us believe external and the

$XXX we During our midpoint interest committed developer we the year to issued developments million exceeded which the the during XXXX, $XXX guidance February capital acquisitions of of in of reaffirmed guidance new million number which year. year of last for and full of the and

properties In acquired properties developer non-developer XX the venture, in financed sheet the rentable XXXX joint XX Heitman the on past in we've since of our Generation V this either months, our square own we've in self-storage acquired XX% balance year. of accounting our IPO, or that Today, including we our interest since wholly-own we net XX the portfolio. of overall interest for feet beginning about

XX% we've more already portfolio guided XX and would we've end XXXX wholly-own closed and to forward between includes what year. Looking in the of to the we acquisitions of than XX expect which by our

rate is our end share placing strong of the positioning of already an market million strategically self-storage common which our befitting enhanced by under to stock since our level of and dividend approximately an rightsized We within $XX position sector. equity XXXX. per REIT of We've capital $X.XX beginning the our age the program annual

fully early with we an connection internalization. in that XXXX. by AFFO path have strong change And dividend also this a announced achievable we have belief the that announced We we to coverage

program equity REIT in RMZ. coordination This of in JCAP the was the as included In the an a we MSCI of also official We've as were Index US November, known engaged REIT. at shareholder believe has over by of a of and that institutional now continuous truly insiders base transformed held end we our institutions into flow with our XX% the shareholder base XXXX. outreach

mature self-storage business leasing as as in to of on open on and occupancy facilities we've Meanwhile, our occupancy XXXX has commenced an Gen of XX storage portfolio state-of-the-art of a of facilities developments are and today XX continued the nicely V committed completed average to XX physical which XX% at basis. for rate

self-storage United portfolio XXXX a combination markets This what self-storage best-in-class portfolio and States. and owned developed consists development assets the wholly of in investments. believe some with of recently we entered are a V the Gen We of of best assets

investment us our with acquisitions. with rights interests the or case large a first development structure product with since and captive refusal been When combined of our has pipeline potential As provides inception, in ROFRs, participate of impending a our well-positioned lease-up we growth to assets. also growth. external a for cycle, growth great in significant intention are internal an inherent the with company acquisition the story We're organic of

as properties period move this in As we new stabilization capture to to our this begin portfolio of continues closer power expect season, supply. pricing even to elevated

stabilized over few NOI wholly next self-storage double-digit face growth internal to growth the headwinds, annual years. many we our While produce portfolio expect assets owned

we believe in a grows as can portfolio decrease and matures. we of Lastly, capital our with accomplish cost this growth

execution coming add We have and the we well value great are significant record we of proven quarters. to deal shareholder by positioned in our model the business JCAP and in the believe a confidence great track team

that, review to I'll over results Kelly to financial and guidance. turn things With

third Last of our updated morning share of guidance, above earnings adjusted expenses, guidance the our impacts of share issued as annual you, with Thank EPS and per quarter which GAAP only, and EPS everyone. John our came earnings our quarter of earnings. both annual as well EPS onetime adjusted Exclusive initial in midpoint per night, $X.XX. $X.XX and reported internalization-related of $X.XX we fourth good

value, Overall, for the guidance, about of $X.XX due progress came primarily implied the quarter. construction to came quarter, The in our the fourth expectations. in above which our above driver fair results beat was during better-than-expected primary at quarter

$X.XX. In above was by owned $X.XX regards we provided the guidance assets night guidance earnings our to the full a to share per high last Additionally, for XXXX, results. wholly end fourth property range, year range adjusted driven quarter of NOI on of stronger-than-expected

XXXX, we in external mentioned, towards but growth past, growth different new in look slightly strong John it acquisitions will more years weighted expect to As being with development. has it than that

new cycle commitments are fundamentals. are to expecting have as pursue about this year, we this we become one to development environment two the willing opportunities current we Specifically, quite the late selective in of and in development

inclusive to expecting of XX XX are developer year-to-date. nine we Additionally, the interest, between acquired we acquire to

standpoint, will and growth AFFO From longer-term to acquisitions accretive value NAV shareholder their are lease-up. add to a value meaningfully they NOI creation very and these and during

several lease-up our earnings our -- are acquisitions we, fair quarters, development share the one, because two, towards we they recording near-term to developer and as dilutive move operating as for value; assets of stabilization. However, publicly burden assume per discussed discontinue

in-place note, and that that consolidated less XXXX the with stabilization. mature time those and we at properties than of of be less in On we period acquisition a XXXX expect the in consolidate XXXX NOI will longer

into 'XX and For physical assets that of into in to on prior XX reference, average XXXX frame consolidated acquired. XX% they nine thus approximately occupied comparison, of months XXXX assets we far the about months lease-up the lease-up. By when occupancy were operating the only were average XX acquired were XX% was and

of timing past. and on large dilutive effect expected and in adjusted the are acquisitions years ages a near-term relatively younger to quantity EPS Overall these greater have

EPS is per a profits than lower quarterly adjusted expected our to with accretive that level in of our than basis. share fair targeted remained $X.XX $X.XX Specifically, value be capital if had acquisitions to loans interest on

lease-up that of we earnings believe growth impact short-term that and at long-term we they as interest easily developers' dilutive these will lease-up earlier available, that value assets. in the justify on strongly prices earnings these the become from We acquiring from receive experienced the good

leverage We and this credit the level to to expect facility think common to our front. when utilize fund it intend on the stock $XX issue to to sense. primarily estimated and company's approximately development remains capital very reasonable year ATM, ability opportunistically continue million under draws makes we to we have Moving our of the our

our maintain to to expect gross we leverage of XX% range assets. the Ultimately, in XX% levels of our

we year, have Additionally, to capital some recycling this expect opportunities.

majority to sale, have While we it when worked have in a a our the on of sense. finance, projects refinance the or facility repayment optionality we always makes desire substantial of own the we the allow to development facilities

are capital A sales. recycling asset we opportunities of issuances recycling and/or provides combination fund they $XX repayments available. refinancing XXXX, structural upwards on In become anticipating of our of to ample availability developer million opportunistic as capital ATM composed buyouts liquidity and line

sources capital year. uses XX our sufficient capital of and of Our for this fund our supplement commitments page to on table reflects

on Lastly, community of the we know investment of year. and the company growth the beyond analyst focus is trajectory of this much this

from operations from funds of growth and the operations. funds adjusted Specifically,

and And business investors internalization metric inflection than QX, later majority we and very expect we presentation. believe operation to we begin care at and still feel when our in early time, have which John as as good reporting point will We ownership that our covering noted of XXXX, by of an common our on as reached a AFFO no dividend properties, FFO XXXX, we about about. most this referenced finally, becomes

it With Q&A. that, open we now up will for

Instructions] be And will Please from proceed At Capital [Operator question KeyBanc your question. question-and-answer Todd conducting Thomas Thank from time, session. our this you. with first a we Markets. is

Hi, morning. thanks. Good

XXXX. being regard there sort the with to of dividend coverage the just question and First expectation early of by

interest, how expected? timing of the that transactions much and guess are we of there, cushion the buyout Just more developer given I the there the sort to about How uncertainty should that think of investments that? in buyout around the extent estimate is than

went probably to is for on at were acquisitions and this very and earlier. John Yes. we of the side earn of through pace consider the resetting Todd, thanks exercise for dividend we careful question. more the acquisitions coverage, the the When and the more time of looking

– didn't have taken the did we've we we've those into the about comfortable very wouldn't acquisitions that. account numbers statements of and impact have feel if wouldn't we sensitized we and dilutive So we the made

perspective, collect if that the on these Just notes. to of acquisitions the of it as we in rate fast put not you'd interest have were X.X% then pace

And gave them. these higher dilutive during her NOI we impact. prepared that explanation the is X.X% when buy the the in-place is near-term Kelly That's remarks on than what of properties

gone through where we've So with we've very sensitizing and of a those landed. exercise comfortable feel numbers robust

little buyouts it cycle completed to sort And for buyouts something just much the nine how timing a Can driven bit timing caused than transactions? of had year-to-date. operational, Previously have on the you What do had earlier else. there? the general, of happened? those visibility happen than in about And in was lease-up you a they sort those or the Okay. financially the talk then – of

Yes.

control the made we equity this equity So of five in the the year, had an few a said several in group the I that in timing who we've the a a keep it developers, investor refinancings, were backed think by of investor, was same for in the last Todd And IRR-driven of private and as five we on buyout, particular case, was that developers developers. early it's acquisition six years, or we quarters this in as mind of commented all for timing row. private the

When they IRR-driven these like have is pass to see projects, that backing equity something private you not time by.

the And a offer. the equity point, in with wait as to a starts to acquisitions, for event, case. happened is So this developer we certain our when us the you always liquidity get an for case push with come that's to what sponsor to private

like on to much has here. way one of a They an But landed the we We every with made this same and in We a happened happened. – a we in offer us came price deal. that acquisitions that engaged that our negotiation.

to the about potential XXXX to million Kelly, to fine balance fund finance then And the $XX outstanding on of fundings. talked balance the the approximately talk in capital recycling And what longer year you Can the are today able forma plan Okay. you $XX nine term? this is million help pro acquisitions? about revolver of permanently you share

Right.

in our that our now tranches right we working the assets we of just through moving of purchased all the are So facility. various in process of

facilities our are now so million. drawn our right $XXX outstanding on And balance

recycling discretion timing. and as at those regards developers' opportunities, are the In John the to events mentioned,

are And And upwards quarter of part $X loan that there so did opportunities this repayments. we comments repay this million. are of $XX We as of have expecting I one million already mentioned year. my some in land

then were And the are potential or which by driven other developer. sales refinancings, opportunity the

pay that And can or from or either take redeploy down proceeds to investments. the new redeploy we so occurs when those line our those, into

Okay. Is permanent any in financing the there financing, embedded guidance?

facility. It's No. No. credit all

Right.

And credit as in you have know an we accordion facility. our

availability. go loans the increases the borrowing balances on As we move through as up, principal year base that

adequacy capital a standpoint, from we're in So great shape.

out And these through I credit we – I ability reasonable. we and whatever several hit off make in approach the we ability quarters NOI, look at is the cash, But in we time. have and you to model and that. a timing the through other certain start some. create to a we on balance events comment time, as to think of properties in point kicking amount earnings of do that point to get through when point and dry substantial stabilization that that that bring total very kind certain the out, where powder down we the feel line facility comfortable and going tops of leverage remain have capital at meaningful reductions these choose can't for we a

Thank Great. Okay. you.

with from Tim from is your proceed question next question. Please B. Riley FBR. Our Hayes

My guys. the morning, this buyout mentioned investor that private you question, the on good first quarter. quarter. activity good John Hey, drove a equity Congrats

Just wondering, if like maybe that in involved for acquisition any if are portfolio drive any you sales of in investors the in you. there kind similarly and investor the see plan looking not-too-distant a to that other just bolster that is near-term properties excuse could And me other future? relationships other then could

P one projects. investor seven interest Yeah. That has in an other

couple under still projects construction. are Now, a of those

that opportunity some go few next be an event. much as there more into properties. on So near other there are year, likely in you for this they're a year of trade sort others later an right could to nowhere But that

mentioned strong of come from deliveries your you And the – kind But you over can on new on past for impact online the then And potential supply just year? the years? expectations the helpful. growth. That's it. NOI your Got that's couple touch portfolio I also of guess, this

always we've top that XX always we're markets. been Well, – noted focused we've

else impacted will comments new are top by to markets. We my XX everybody So supply. solely the relate like

our think new I north are somewhere of you if properties some of managed our right or keep the two, out But we that online. XX% coming platforms. mind competition look by now next in best-in-class year have properties –

of ease new as we're changing. is terms the way lease-up rational a with into from that fine. now. to is we've this, and through we're supply don't that just three going in So years I physical XXXX. And going dealing doing And managing standpoint, that pressure get that for lease We to been continue think a see in to we

in and a that away we fairly on the picture debt moved degree the into calls read the but XXXX of tough banks I've dropping transcripts have start everybody look at when is anecdotal sees significant off evidence of gone REITS. deliveries probably on supply be the to financing other strong And projected development And from you that the the the up. have pretty You been of the XXXX the self-storage sector lease-up a particularly cost properties pretty looking when to everybody, year XXXX, has for general, they dramatically.

that major in pretty every have you It's market country. the in well-documented labor shortages

every to more filling construction that's X.X available is even construction difficult. I jobs the people number is job fill think maybe and

part So, of XXXX get high in start XXXX a and way on confidence clear that process you yeah, have very into latter is part as here XXXX you and significantly. delivered through and absorbed level the What's of into sky first every of as the gets starts to in drop and a and rational XXXX we move

your strong the comment of How year? been But the definitely, note comparing ahead and lease-up over see side. been how It's face just you I to trending the the helpful. appreciate do and course new broadly And That's supply. Street underwriting in it. has initial of underwriting. Got the about color physical just that there of your there. on your very initial rate

this is Yeah Tim, Jonathan.

power As the it rental leg the underwriting And the seasons last we on season. fourth pricing is the and on rental relates at are way three really know to rate the – forma look get that you underwriting you focus the first or as pro that entirely occupancy.

be on see lease-up push to and really street rate that the properties. front as the today XX year-over-year season time achieving properties So on we're get an on ability X% the to some get period. harder to there at XXXX. But so need into our don't markets still optimistic that a you to the the extra any we goals the concerns going numbers and We've are defined to we're may Realistically, of -- going rates owned hit were north projections time in our there. on seen wholly

So we and some are positive shoots seeing momentum. some green there

have others existing one additionally that to then tenants. the And increases that not rate may is we lever

on in I to-date and XXXX. really run X% We've been existing tenants So on that have traditionally see teens those down. range low throughout the pushing slowing trend portfolio really the rates XX% to our don't in

those have reasonable there and market some to believe do customers what we a to So up existing opportunities bring time we rate frame. is

that's Yes Okay. helpful. really

about storage capital the next business? Do my would third areas developers even you broader your or find into? And along pretty some opportunities you've doesn't through on fewer results? foot comments helpful. to activity? fewer think needing to weighing moving that any assets could people to invest you of Just Does that look and even see mean be construction less just and do can so seem to course. they you traffic potential new answered second coming potentially around to as have market it down see exposure opportunities sell for significantly direct and recycle the coronavirus is today, your you about just question have thinking kind stock the this of but that on epidemic of derivatives. with the today impacts could It of And talk But but can't

serious topic. a at might be to look philosophical to political the and but looks you have coronavirus what want or something whatever on happen. you don't knee-jerk or statistics of And X% around reported most get the appears overly to or population Tim, want in had based of And you the XX,XXX X people. not And China of be happen, that cases this China. if concern. of to on a comments. as that XX reaction on It's flu. sure kind speculation But like Yes. a and it might global I coronavirus -- And the out billion resulted have people be recovered. reported death of health the million don't about out has in have in I certainly that to XX,XXX number flipping cases

U.S. impact same flu you've seen you've had and at impact the than got And contrary But of just human of world in bunch any around that XX,XXX -- dramatic because on halfway speculation other time of fact on in the it's and XXXX/XXXX the that and this you've of gotten a -- deaths season markets. people headlines reported based the of none because part on from life short-term it's it's a sick. who've

And to else lot it's impacted it the office that I bad. to if impacted true world is is out be everybody die right and be that definitive evidence by pandemic storage is turns feel of that and in like impacted. that's impacted is everyone just long-term a a people and where no then now There's going

based things lessening appears place a going people they see put I what upon with demand. that they have factual a are if me you're dies room happen And really the running And case a We don't otherwise. half dangerous. probably to of continue And to facts. world then purely from storage find need a deal speculation storage for this to continue a be people's to to reaction to guess going space the because in I might standpoint about which to future be of

comments. thanks Yes. that. the Well, And to hope my come it I for appreciate taking let's questions. doesn't

next from Please Jon question Our proceed Instructions] question Petersen [Operator is Jefferies. with your from

Maybe start you'll have the owner seems an of more -- year you more the Great. commentary, becoming by this end than definitely obviously, of to more like with management of internalized a high-level lender. a guys of you're it

or change going going how properties? the to of a style are How about over management things to the what's two? should So evolve company think the of we from year next management

get and up into spend that's time value. are in strategic looking that's on and us maximize from decisions of the we'll end the to a make point that by to standpoint can If future that do a well, we a the we day a position good some it lot than who portfolio, mean, high something it to Jon, like as that's and guys and better scale, continue of internalization shareholder large larger managing and possibly currently feel management. do well every question we gets a out add and we drive consider to trying we Certainly property where value that bar. I facilities do with shareholder at

It and are a those managing investment. so, sense those front-end job adding doing all policies in capital involves significant management I mean, are it right as as things. investment to reap exceptional investment an to in costly. will the of systems people who and long is do substantial facilities It substantial our procedures people, a and benefits continue involves now and makes we

the And company a we're is we basis of about do which a right continue years things. just And the making growth lot a now. being the do and I And past. I see of as continue been doing timely think But what way than have and that to we've look trajectory go. made for that think scale we makes more decisions at decisions on level five different to in any don't we'll there that target decision the to whole it to on sense below,

Jon. Hey, is Jonathan. This

to that. color little more to Just add a

in believe when current now, optionality. right lease-up, portfolio particularly model tremendous in and think states value you there's about operator in Our our we the

best-in-class four REITs of at all have point we the us. at behind And for these so managing And wheel assets. stage, to the this John's platforms we have

hands like good feel in we're we now. really So right

at asking But stuff than growth few this puts I this your if more less it some be leased, self-storage a a online? of lease-up portfolio the and I'm I'm stuff for And of lot of similar point growth how I you years rate more risk about peers. mean, your and years to should in over future hoping as or I of we at Okay. stabilized mean think AFFO should multiple obviously, get guidance the here, next that's kind guess, in you've what you curious next over there, on had should high a there's Obviously, seem bring the but like growth. any you're there's takes lot period you just bringing trajectory where of few be some lower of years? level got thoughts AFFO the would

I some Yeah. we've very can $X.XX we that think dividend. the dividend of XXXX commentary around I very mean, We you given by first draw have vocal conclusions think be that we'll been covering we from a coverage. the -- quarter that

that looking And you And that's quarters. out that trajectory point so time. of to eight basically a kind now from right in seven, gives

four the next portfolio Beyond double-digits acquisitions on for is and what conclusion AFFO certainly three possibly in years and assumptions and into that that growth come the pretty make year. take you the fifth to we've the can or three based on years today easily a done --

we like -- I've and growth internal prepared the discussed remarks. that my engine that in that's So feel

that development, cost The fact confidence that fact than really in growth investors and we've should rate. lower we has of look that And sites acquisitions, higher acquisition, give from as to then as window come kind at for lot opens doing feel achieve good we us rewards of we a good the like and of that growth, underwritten which we have to that achieve results good ventures. price markets capital, of historically the other stock the joint with performance, invested in returning acquisitions, been things kind that increasing

growth can pretty things growth All three the those But years. in four over even we're the or confident internal more. that next that of accelerate certainly

Okay. when And expensive? first which us relatively is opportunity to you Series A might stock, Can remind refinance preferred the one then more. be just maybe your

A so Yeah. terms from about Series its XX, by of in what is The now. XXXX, callable XX months July

there until have any opportunity to wait then? Is Or kind you before anything to have then? Okay. do

would of negotiated opportunity the to before done, up holder there contractual no stock. transaction. anything then. the do were a it That's really There's something If to be

And -- can't on speculation. so pure would that be really can't comment I that

right. Thank Fair enough. All much. you very

we question-and-answer of And our I now session. the reached end remarks. And for to closing Good the call turn have John over will

for weeks. in your seven talking interest participating the to and look you eight in I guess, for seven JCAP to you call Thank weeks, forward everyone in about or again we

and have good a Bye. thanks day. So

This concludes conference. today's

lines You disconnect your you Thank for this participation. time. at may your